BILL ANALYSIS Ó AB 225 Page 1 CONCURRENCE IN SENATE AMENDMENTS AB 225 (Chau and Nestande) As Amended August 20, 2014 2/3 vote. Urgency ---------------------------------------------------------------------- |ASSEMBLY: | |(May 16, 2013) |SENATE: |32-0 |(August 25, 2014) | ---------------------------------------------------------------------- (vote not relevant) ----------------------------------------------------------------------- |COMMITTEE VOTE: |6-1 |(August 27, 2014) |RECOMMENDATION: |concur | |(H. & C.D.) | | | | | ----------------------------------------------------------------------- Original Committee Reference: TRANS. SUMMARY : Gives the Department of Housing and Community Development (HCD) greater flexibility in its administration of the Mobilehome Park Resident Ownership Program, including allowing HCD to lend these funds for individuals to repair their mobilehomes and for nonprofit sponsors or local public entities to acquire mobilehome parks. The Senate amendments delete the Assembly version of this bill, and instead: 1)Rename the Mobilehome Park Purchase Fund as the "Mobilehome Park Rehabilitation and Purchase Fund" (fund). 2)Rename the Mobilehome Park Resident Ownership Program as the "Mobilehome Park Rehabilitation and Resident Ownership Program" (MPROP). 3)Permit HCD to make loans from the fund to nonprofit housing sponsors and local public entities to acquire a mobilehome park, provided that no less than 30% of residents at the time of acquisition are low-income. Such loans must be to either: a) Cure significant outstanding violations of state law governing health and safety in mobilehome parks; or b) Support a park acquisition that, in the determination of HCD, will substantially benefit low- and moderate-income homeowners, including maintaining affordable space rent AB 225 Page 2 levels. 1)Require HCD to make loans for the minimum amount necessary to bring the park into compliance with all applicable health and safety standards and maintain affordability, for a term of no more than 40 years at 3% interest, and not to exceed 115% of the value of the collateral securing the loan. 2)Direct HCD to determine eligibility for and the amounts of these loans by considering, among other things, all of the following: a) Current health and safety conditions in the park and the likelihood that they could be remedied without the loan; b) The degree to which the loan will benefit low-income homeowners; and c) The age of the park and the age of the infrastructure that will be rehabilitated. 1)Require HCD, before making a loan, to verify the projected operating budget of the park, funds for and costs of purchase and rehabilitation, and that no park residents will be involuntarily displaced as a result of the purchase or that the displacement will be mitigated as required under state and local law. 2)Permit HCD to make loans to resident organizations or qualified nonprofit sponsors to assist low-income homeowners to make needed repairs or accessibility-related upgrades under the following circumstances: a) Applicants must otherwise have qualified for an MPROP loan; and b) Applicants must demonstrate sufficient organizational stability and capacity to manage a portfolio of loans to individual homeowners. 1)Allow HCD to adopt guidelines to implement the repair and accessibility-related upgrade loan program. 2)Increase the loan term for loans to individual low-income homeowners from 30 to 40 years. 3)Increase the loan term for loans to resident organizations from AB 225 Page 3 30 to 40 years, and from 100% to 115% of the value of the collateral securing the loan. 4)Include an urgency clause. FISCAL EFFECT : According to the Senate Appropriations Committee: 1)Unknown increased expenditure of funds for new loans for mobilehome repairs and upgrades, and as a result of potential increased demand for park purchase loans due to more flexible terms; and 2)Minor costs to HCD. COMMENTS: Background: The residents of California's nearly 5,000 mobilehome parks typically own their mobilehomes and rent the spaces in the mobilehome park in which the homes are placed. For various reasons, mobilehome park residents in some parks have decided to join together and buy the park or their individual spaces within it. This is referred to as a conversion to resident ownership. Historically, when mobilehome parks have converted to resident ownership, the residents have initiated the process and enlisted the help of a nonprofit organization. The nonprofit organization typically buys the entire park and sells lots to individual owners. MPROP was created in 1984 to provide low-interest loans to finance the conversion of mobilehome parks to resident ownership and ensure that low-income residents' housing costs remained at an affordable level after conversion. The program is funded through a $5 fee that certain mobilehome owners pay along with their annual registration fee, as well as through loan repayment. There is currently about $34 million in the MPROP fund. New loan activity under MPROP has been slow in recent years, with only a handful of loans made since 2007. The program had no successful applications in 2010, 2012, or last year. HCD points to the increasing cost and complexity of park conversions as two of the primary reasons for the reduction in the number of successful applications. Purpose of this bill: The author introduced this bill to AB 225 Page 4 facilitate programmatic changes to MPROP that will make the application and loan requirements more attractive to potential borrowers. The changes will ensure that HCD can use the accumulated funds to preserve affordable homeownership opportunities. The bill aims to achieve three key goals. First, this bill aims to make MPROP work better for conversions to resident ownership. This bill would make several changes to ensure the most attractive loan terms for resident-initiated conversions. These include increasing the maximum loan-to-value ratio to 115% for loans made to resident organizations, and allowing for a longer repayment period to better match MPROP loans with other potential funding sources, such as loans from the Federal Housing Administration. Second, this bill would ensure that MPROP can be used for the acquisition and rehabilitation of mobilehome parks by nonprofit developers who will own and operate the park. Some parks in California are suffering from years of neglect, leading to substandard conditions within the park. If not remedied, the park could eventually close, displacing the homeowners. With many troubled parks, having a nonprofit owner take over ownership and management while undertaking repairs can stabilize the park and ensure that it remains an affordable source of housing. This bill streamlines MPROP rules governing acquisition by nonprofits by separating in statute the MPROP funding rules for nonprofit acquisitions from those governing conversions to resident ownership, and provides attractive loan terms for nonprofit acquisitions. The proponents believe this will ensure that the program better supports funding for nonprofit acquisition and rehabilitation. Third, this bill would allow a portion of the funds to be used by homeowners for rehabilitation and accessibility improvements. This bill authorizes MPROP funds to be used to provide low-cost loans to low-income homeowners in need of minor repairs or accessibility upgrades for their homes, to be provided in connection with an MPROP-funded acquisition or conversion by resident organizations or qualified nonprofit sponsors. This bill was substantially amended in the Senate and the Assembly-approved version of this bill was deleted. Analysis Prepared by : Rebecca AB 225 Page 5 Rabovsky / H. & C.D. / (916) 319-2085 FN: 0005541